Cost of Capital WACC

equity

debt

I.E
2014 cost of non-tardebele 2,041,294

12.8914%

Cost of Equity DDM

total divend
paiud up capital
no of shares
DPS
Growth of Div: CAGR
contiunous grwoth

retention amount
NPBT
Tax expense
NAT
retention ratio
total capital employed
NP/total capital ROCE
MPS
ke

Cost of Equity CAPM

Beta calulation: Formula:
Beta covariance between stock & market/variance of market
preious 5 years monthy data FFL
1-Jul-09 50
1-Aug-09 51
1-Sep-09 49
1-Oct-09 48
1-Nov-09 47
1-Dec-09 57
1-Jan-10 60
1-Feb-10 57
1-Mar-10 53
1-Apr-10 65
30-Jun-14 61
Beta (correlation between stock & market*sigma of stock)/sigma of market
Rf govt bonds
10%

ke=rf+Beta(rm-rf)
ke 0.73193%
ke annual 8.7831810%

Cost of Equity P/E multipier

ke=(D0(1+g)/MPS)-g
D0=EPS ke=(EPS(1+0)/MPS)-0
g=0 ke=EPS/MPS
ke=1/(MPS/EPS)
ke=1/(P/E)

Cost of Capital WACC

kd
Ke

tax rate
tax rate
tax expense
EBT
tax rate
wd
we

WACC
 wacc=wd*kd(1-tax)+wp*kp+we*ke
oriinary equity ke DDM
prefered stocks kp redeemable
tradeable debt kd YTM
non-tradeable kdn interset exp/avg. long term intersert bea
outsider
Avg loong term debt
15,983,124 2,050,602 13,932,522
21,930,522 4,193,929 17,736,593
15834557.5 15,834,558

MPS=D0(1+g)/(ke-g) stable div policy same amount

ke=(D0(1+g)/MPS)-g passive residual policy DDM not applied
2009 2010 2011
8,922,631 8,820,852 16,963,176
6,785,271 6,785,271 8,481,588
678527.1 678527.1 848158.8
13.15 13.00 20.00
Simple avg Gordon growth rate
3.63% retention ratio*ROCE 7.8209%

2,101,034 6,175,970 11,366,884

16,860,991 23,505,322 44,737,408
5,837,326 8,508,500 16,407,348
11,023,665 14,996,822 28,330,060
19.06% 41.18% 40.12%
35,784,586 38,649,628 49,373,013
30.81% 38.80% 57.38%
50
24.6591% Simple avg 21.6142%

ke=rf+Beta(rm-rf)
Regression Eq:
ween stock & market/variance of market
KSE-100 index Returns of FFL Returns of KSE
31000 - -
31200 1.980% 0.6431%
31300 -4.001% 0.3200%
32000 -2.062% 2.2118%
31967 -2.105% -0.1032%
31657 19.290% -0.9745%
33000 5.129% 4.1548%
33200 -5.129% 0.6042%
33100 -7.276% -0.3017%
34000 20.410% 2.6827%
35000 -6.351% 2.8988%
1.989% 1.2136%
ween stock & market*sigma of stock)/sigma of market
govt t-bills
8.52% 2013 2014

2009 2010 2011

EPS/MPS=Earning Yield rate

wacc=wd*kd(1-tax)+we*ke
12.8914% wd
24.6591% DDM we
8.7832% CAPM total debt
27.6390% P/E total equity
34% total capital
tax expense/EBT
7,873,860
25,455,576
30.9318%
26.79341%
73.20659%

20.437731% DDM
8.815513% CAPM
24.796940% P/E
CAPM APM P/E mulipier
YTM irredemable div/mps

wi*ki+wj*kj
insider

same growth same payout ratio

2012 2013 2014

19,719,692 19,528,856 17,366,051
12,722,382 12,722,382 12,722,382
1272238.2 1272238.2 1272238.2
15.50 15.35 13.65
15.11

3,015,298 1,449,228 215,665

34,846,192 27,274,623 25,455,576
12,111,202 9,194,995 7,873,860
22,734,990 18,079,628 17,581,716
13.26% 8.02% 1.23%
55,398,309 57,128,361 59,653,190
41.04% 31.65% 29.47%
20
Gordon growth

Rf rm-rf
- -
0.5631% 0.0800% covariance b/w stck & market
0.5631% -0.2431% variance of market
0.5631% 1.6487% Beta
0.5631% -0.6663%
0.5631% -1.5376% sigma of FFL
0.5631% 3.5917% sigma of KSE
0.5631% 0.0411% correlation b/w stock & market
0.5631% -0.8647% beta
0.5631% 2.1196%
0.5631% 2.3357%
average rm monthly
 2015 2016 2017

2012 2013 2014

MPS 50
EPS net profit/total no os shares
EPS 13.8195158736784
EYR 27.63903%
P/E multiplier 27.639%

total debt/total capital 26.7934%

total equity/total capita 73.2066%
15,983,124
43,670,066
59,653,190
Comparables value of company
FCF
Wacc
value of company

2009
D0 13.1499994620701

retention ratio
ROCE

20.48%
7.820880450499900%
38.19%

Beta calculation by Reg Equation: Regression b/w stock returns & market returns
y=a+bx Regression of stock returns on market returns
slope of reg line
regression coeeficient
0.010520% ke=rf+Beta(rm-rf)
0.027731% Beta
0.379369285689005 Beta

10.13045%
1.6653%
0.0623618248959225
0.379369285689005
 2018
ke
rf 30th june 2018 Annual form
1 month tbill 5.25% 0.43750%
3 month t bill 5.75%
6 mont t bill 6%
1 yer t bill 7%
FCF(1+g)/waac-g
10000000
8.815513% g 6%
376485556.239012

FV=PV(1+g)^n

2010 2011 2012 2013 2014

12.9999995578659 20 15.5 15.35 13.65
-0.0114068372882393 0.538461590785108 -0.225 -0.009677 -0.110749
3.63%

rention amount/net profit

Net proft/total capotal employed

0.379369285689005 Regression b/w stock returns & market returns

0.379369285689005 Regression b/w stock returns & market premium rm-rf
per month
FV=PV(1+g)^n
DDM:
ke=(D0(1+g)/MPS)-g Wrong
ke=(D0(1+g)/MPS)+g Correct

Tax Rate:
tax expense/EAT Wrong
tax expense/EBT Correct